essay on leading causes of unemployment around the world

Macroeconomic Policy Around the World

Causes of unemployment around the world, learning objectives.

By the end of this section, you will be able to:

• Explain the nature and causes of unemployment
• Analyze the natural rate of unemployment and the factors that affect it
• Identify how undeveloped labor markets can result in the same hardships as unemployment

We can categorize the causes of unemployment in the world’s high-income countries in two ways: either cyclical unemployment caused by the economy when in a recession, or the natural rate of unemployment caused by factors in labor markets, such as government regulations regarding hiring and starting businesses.

Unemployment from a Recession

For unemployment caused by a recession, the Keynesian economic model points out that both monetary and fiscal policy tools are available. The monetary policy prescription for dealing with recession is straightforward: run an expansionary monetary policy to increase the quantity of money and loans, drive down interest rates, and increase aggregate demand . In a recession , there is usually relatively little danger of inflation taking off, and so even a central bank, with fighting inflation as its top priority, can usually justify some reduction in interest rates.

With regard to fiscal policy , the automatic stabilizers that we discussed in Government Budgets and Fiscal Policy should be allowed to work, even if this means larger budget deficits in times of recession. There is less agreement over whether, in addition to automatic stabilizers, governments in a recession should try to adopt discretionary fiscal policy of additional tax cuts or spending increases. In the case of the Great Recession, the case for this kind of extra-aggressive expansionary fiscal policy is stronger, but for a smaller recession, given the time lags of implementing fiscal policy, countries should use discretionary fiscal policy with caution.

However, the aftermath of the Recession emphasizes that expansionary fiscal and monetary policies do not turn off a recession like flipping a switch turns off a lamp. Even after a recession is officially over, and positive growth has returned, it can take some months—or even a couple of years—before private-sector firms believe the economic climate is healthy enough that they can expand their workforce.

The Natural Rate of Unemployment

Unemployment rates in European nations have typically been higher than in the United States. In 2006, before the start of the Great Recession , the U.S. unemployment rate was 4.6%, compared with 9% in France, 10.4% in Germany, and 7.1% in Sweden. We can attribute the pattern of generally higher unemployment rates in Europe, which dates back to the 1970s, to the fact that European economies have a higher natural rate of unemployment because they have a greater number of rules and restrictions that discourage firms from hiring and unemployed workers from taking jobs.

Addressing the natural rate of unemployment is straightforward in theory but difficult in practice. Government can play a useful role in providing unemployment and welfare payments, for example, by passing rules about where and when businesses can operate, and assuring that the workplace is safe. However, these well-intentioned laws can, in some cases, become so intrusive that businesses decide to place limits on their hiring.

For example, a law that imposes large costs on a business that tries to fire or lay off workers will mean that businesses try to avoid hiring in the first place, as is the case in France. According to Business Week , “France has 2.4 times as many companies with 49 employees as with 50 … according to the French labor code, once a company has at least 50 employees inside France, management must create three worker councils, introduce profit sharing, and submit restructuring plans to the councils if the company decides to fire workers for economic reasons.” This labor law essentially limits employment (or raises the natural rate of unemployment).

Undeveloped Labor Markets

Low-income and middle-income countries face employment issues that go beyond unemployment as it is understood in the high-income economies. A substantial number of workers in these economies provide many of their own needs by farming, fishing, or hunting. They barter and trade with others and may take a succession of short-term or one-day jobs, sometimes receiving pay with food or shelter, sometimes with money. They are not “unemployed” in the sense that we use the term in the United States and Europe, but neither are they employed in a regular wage-paying job.

The starting point of economic activity, as we discussed in Welcome to Economics! , is the division of labor, in which workers specialize in certain tasks and trade the fruits of their labor with others. Workers who are not connected to a labor market are often unable to specialize very much. Because these workers are not “officially” employed, they are often not eligible for social benefits like unemployment insurance or old-age payments—if such payments are even available in their country. Helping these workers to become more connected to the labor market and the economy is an important policy goal. Recent research by development economists suggests that one of the key factors in raising people in low-income countries out of the worst kind of poverty is whether they can make a connection to a somewhat regular wage-paying job.

Key Concepts and Summary

We can address cyclical unemployment by expansionary fiscal and monetary policy. The natural rate of unemployment can be harder to solve, because it involves thinking carefully about the tradeoffs involved in laws that affect employment and hiring. Unemployment is understood differently in high-income countries compared to low- and middle-income countries. People in these countries are not “unemployed” in the sense that we use the term in the United States and Europe, but neither are they employed in a regular wage-paying job. While some may have regular wage-paying jobs, others are part of a barter economy.

Self-Check Questions

What are the different policy tools for dealing with cyclical unemployment?

If there is a recession and unemployment increases, we can call on an expansionary fiscal policy (lower taxes or increased government spending) or an expansionary monetary policy (increase the money supply and lower interest rates). Both policies stimulate output and decrease unemployment.

Explain how the natural rate of unemployment may be higher in low-income countries.

Aside from a high natural rate of unemployment due to government regulations, subsistence households may be counted as not working.

Review Questions

What are the two types of unemployment problems?

In low-income countries, does it make sense to argue that most of the people without long-term jobs are unemployed?

Critical Thinking Question

Is it possible to protect workers from losing their jobs without distorting the labor market?

Explain what will happen in a nation that tries to solve a structural unemployment problem using expansionary monetary and fiscal policy. Draw one AD/AS diagram, based on the Keynesian model, for what the nation hopes will happen. Then draw a second AD/AS diagram, based on the neoclassical model, for what is more likely to happen.

Retrieve the unemployment data from The World Bank database (http://databank.worldbank.org/data/home.aspx) for India, Spain, and South Africa for 2011-2015. Prepare a chart that compares India, Spain, and South Africa based on the data. Describe the key differences between the countries. Rank these countries as high-, medium-, and low-income countries. Explain what is surprising or expected about this data. How did the Great Recession impact these countries?

Viscusi, Gregory, and Mark Deen. “Why France Has So Many 49-Employee Companies.” Business Week . Last modified May 3, 2012. http://www.businessweek.com/articles/2012-05-03/why-france-has-so-many-49-employee-companies.

• Principles of Macroeconomics 2e. Provided by : OpenStax. Located at : http://cnx.org/contents/[email protected] . License : CC BY: Attribution . License Terms : Download for free at http://cnx.org/contents/[email protected]

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19.3 Causes of Unemployment around the World

1 min read • june 24, 2024

Unemployment is a complex global issue with various causes, from structural changes to cyclical factors. Understanding these causes helps policymakers craft effective strategies to combat joblessness. Labor markets and unemployment rates differ across countries due to factors like unionization, employment protection, and education levels.

Nations tackle unemployment through diverse strategies, including fiscal and monetary policies, targeted subsidies, and infrastructure investment. Long-term unemployment poses unique challenges, impacting the natural rate of unemployment and potentially leading to hysteresis, where high jobless rates persist even after economic recovery.

Causes and Impacts of Unemployment Globally

Causes of global unemployment.

• Shift from manufacturing to service-based industries leads to job losses in traditional sectors (manufacturing, mining)
• Technological advancements (automation, AI) lead to job displacement, particularly for routine tasks
• Globalization contributes to job losses in certain sectors as production moves to countries with lower labor costs
• Economic recessions and downturns cause widespread layoffs as businesses struggle (Great Recession of 2008-2009)
• Reduced aggregate demand leads to decreased production and employment
• Ski resorts hire more workers in winter, leading to higher unemployment in summer
• Farms require more labor during planting and harvesting seasons
• Recent graduates entering the job market
• Workers relocating to new areas
• Minimum wage laws that exceed market equilibrium can lead to higher unemployment, particularly for low-skilled workers
• Generous unemployment benefits can reduce incentives to work, prolonging unemployment spells
• Rapid population growth can outpace job creation, leading to higher unemployment (developing countries)
• Aging populations can lead to increased retirement rates, creating labor shortages in some sectors

Labor markets and unemployment rates

• Unionized industries (manufacturing, public sector) may have higher unemployment than non-unionized sectors
• Countries with strong EPL (France, Spain) tend to have higher unemployment than those with more flexible regulations (US, UK)
• Germany's "Kurzarbeit" program provides subsidies for companies to retain workers during downturns
• Netherlands has a high share of part-time workers and relatively low unemployment
• Labor market flexibility can help reduce unemployment by allowing for easier hiring and firing
• US states with higher minimum wages tend to have higher youth unemployment rates
• Switzerland and Japan have highly educated workforces and low unemployment
• Skills mismatch between job requirements and worker qualifications can contribute to unemployment

National strategies for unemployment

• Increasing government spending or reducing taxes stimulates aggregate demand, creating jobs
• Effectiveness depends on the size of the multiplier effect and potential crowding-out of private investment
• Lowering interest rates encourages borrowing and investment, boosting economic growth and employment
• Effectiveness may be limited during liquidity traps or if banks are reluctant to lend
• Government identifies groups with high unemployment (youth, long-term unemployed)
• Provides incentives (tax breaks, wage subsidies) for firms to hire these workers
• Can be effective in reducing unemployment for targeted groups but may lead to substitution effects (hiring subsidized workers instead of unsubsidized ones)
• Investing in public works projects (roads, bridges, schools) creates jobs and improves long-term productivity
• Effectiveness depends on the quality and productivity of the investments
• Upgrading the skills of the workforce to match labor market demands reduces structural unemployment
• Can be effective in the long run but may have lagged effects as workers complete training
• Encouraging firms to reduce hours instead of laying off workers during downturns preserves jobs
• Can be effective in the short term but may slow labor market adjustments and productivity growth

Long-term unemployment and policy implications

• The level of unemployment consistent with stable inflation in the long run
• Policymakers aim to achieve this rate through various economic policies
• The persistence of high unemployment rates even after economic recovery
• Long-term unemployment can lead to skill erosion and reduced employability, making it harder to return to pre-recession employment levels

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42.4 – Causes of Unemployment around the World

Learning Objectives

By the end of this section, you will be able to:

• Explain the nature and causes of unemployment
• Analyze the natural rate of unemployment and the factors that affect it
• Identify how undeveloped labor markets can result in the same hardships as unemployment

We can categorize the causes of unemployment in the world’s high-income countries in two ways: either cyclical unemployment caused by the economy when in a recession, or the natural rate of unemployment caused by factors in labor markets, such as government regulations regarding hiring and starting businesses.

Unemployment from a Recession

For unemployment caused by a recession, the Keynesian economic model points out that both monetary and fiscal policy tools are available. The monetary policy prescription for dealing with recession is straightforward: run an expansionary monetary policy to increase the quantity of money and loans, drive down interest rates, and increase aggregate demand . In a recession , there is usually relatively little danger of inflation taking off, and so even a central bank, with fighting inflation as its top priority, can usually justify some reduction in interest rates.

With regard to fiscal policy , the automatic stabilizers that we discussed in Government Budgets and Fiscal Policy should be allowed to work, even if this means larger budget deficits in times of recession. There is less agreement over whether, in addition to automatic stabilizers, governments in a recession should try to adopt discretionary fiscal policy of additional tax cuts or spending increases. In the case of the Great Recession, the case for this kind of extra-aggressive expansionary fiscal policy is stronger, but for a smaller recession, given the time lags of implementing fiscal policy, countries should use discretionary fiscal policy with caution.

However, the aftermath of the Recession emphasizes that expansionary fiscal and monetary policies do not turn off a recession like flipping a switch turns off a lamp. Even after a recession is officially over, and positive growth has returned, it can take some months—or even a couple of years—before private-sector firms believe the economic climate is healthy enough that they can expand their workforce.

The Natural Rate of Unemployment

Unemployment rates in European nations have typically been higher than in the United States. In 2006, before the start of the Great Recession , the U.S. unemployment rate was 4.6%, compared with 9% in France, 10.4% in Germany, and 7.1% in Sweden. We can attribute the pattern of generally higher unemployment rates in Europe, which dates back to the 1970s, to the fact that European economies have a higher natural rate of unemployment because they have a greater number of rules and restrictions that discourage firms from hiring and unemployed workers from taking jobs.

Addressing the natural rate of unemployment is straightforward in theory but difficult in practice. Government can play a useful role in providing unemployment and welfare payments, for example, by passing rules about where and when businesses can operate, and assuring that the workplace is safe. However, these well-intentioned laws can, in some cases, become so intrusive that businesses decide to place limits on their hiring.

For example, a law that imposes large costs on a business that tries to fire or lay off workers will mean that businesses try to avoid hiring in the first place, as is the case in France. According to Business Week , “France has 2.4 times as many companies with 49 employees as with 50 … according to the French labor code, once a company has at least 50 employees inside France, management must create three worker councils, introduce profit sharing, and submit restructuring plans to the councils if the company decides to fire workers for economic reasons.” This labor law essentially limits employment (or raises the natural rate of unemployment).

Undeveloped Labor Markets

Low-income and middle-income countries face employment issues that go beyond unemployment as it is understood in the high-income economies. A substantial number of workers in these economies provide many of their own needs by farming, fishing, or hunting. They barter and trade with others and may take a succession of short-term or one-day jobs, sometimes receiving pay with food or shelter, sometimes with money. They are not “unemployed” in the sense that we use the term in the United States and Europe, but neither are they employed in a regular wage-paying job.

The starting point of economic activity, as we discussed in Welcome to Economics! , is the division of labor, in which workers specialize in certain tasks and trade the fruits of their labor with others. Workers who are not connected to a labor market are often unable to specialize very much. Because these workers are not “officially” employed, they are often not eligible for social benefits like unemployment insurance or old-age payments—if such payments are even available in their country. Helping these workers to become more connected to the labor market and the economy is an important policy goal. Recent research by development economists suggests that one of the key factors in raising people in low-income countries out of the worst kind of poverty is whether they can make a connection to a somewhat regular wage-paying job.

We can address cyclical unemployment by expansionary fiscal and monetary policy. The natural rate of unemployment can be harder to solve, because it involves thinking carefully about the tradeoffs involved in laws that affect employment and hiring. Unemployment is understood differently in high-income countries compared to low- and middle-income countries. People in these countries are not “unemployed” in the sense that we use the term in the United States and Europe, but neither are they employed in a regular wage-paying job. While some may have regular wage-paying jobs, others are part of a barter economy.

Viscusi, Gregory, and Mark Deen. “Why France Has So Many 49-Employee Companies.” Business Week . Last modified May 3, 2012. http://www.businessweek.com/articles/2012-05-03/why-france-has-so-many-49-employee-companies .

a monetary policy that increases the supply of money and the quantity of loans

the amount of total spending on domestic goods and services in an economy

a significant decline in national output

economic policies that involve government spending and taxes

tax and spending rules that have the effect of slowing down the rate of decrease in aggregate demand when the economy slows down and restraining aggregate demand when the economy speeds up, without any additional change in legislation

the government passes a new law that explicitly changes overall tax or spending levels with the intent of influencing the level or overall economic activity

Principles of Economics: Scarcity and Social Provisioning (3rd Ed.) Copyright © by Erik Dean; Justin Elardo; Mitch Green; Benjamin Wilson; Sebastian Berger; Richard Dadzie; and Adapted from OpenStax Principles of Economics is licensed under a Creative Commons Attribution 4.0 International License , except where otherwise noted.

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Japan: Unemployment rate from 1999 to 2023

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Brazil: Unemployment rate from 1999 to 2023

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South Africa: Unemployment rate from 2004 to 2023

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Youth unemployment rate of G20 countries in 2023

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Youth unemployment rate in the European Union and the euro area from 2011 to 2021

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Youth unemployment rate in EU member states as of August 2023 (seasonally adjusted)

Coronavirus pandemic and unemployment

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Number of jobs lost during the COVID-19 pandemic in Latin America and the Caribbean from 1st quarter to 4th quarter 2020, by subregion (in millions)

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Estimated number of working hours lost worldwide from 1st quarter 2020 to 2nd quarter 2022, in full-time equivalent jobs (in millions)

Unemployment length in travel sector during coronavirus pandemic in China 2022

Unemployment length among those who lost their jobs in tourism sector during COVID-19 pandemic in China as of February 2022

COVID-19 impact on jobs in the out-of-home leisure economy in the UK, by subsector

Estimated number of job losses in the out-of-home leisure economy due to the coronavirus (COVID-19) pandemic in the United Kingdom (UK) in 2020, by subsector (in 1,000 jobs)

Perceptions about unemployment

• Basic Statistic Most important national issues in the European Union 2023
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Most worrying topics worldwide 2024

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What do you think is the most important problem facing this country today?

Leading challenges facing ASEAN 2024, by country

Leading socio-political and economic challenges faced in Southeast Asia in 2024, by country

Main problems of Argentina 2024

Main problems of Argentina in 2024

Public opinion on Mexico´s main problems 2024

Main problems of Mexico according to the public opinion in May 2024

Share of people who are worried about unemployment and jobs in South Africa 2022-2024

Monthly share of people who are worried about unemployment and jobs in South Africa from 2022 to 2024

Unemployment benefits

• Basic Statistic U.S. average duration of unemployment benefit collection 2021
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Amount received by unemployment insurance beneficiaries in France 2021

Distribution of unemployment benefit recipients according to the monthly compensation amount in France in June 2021

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Number of recipients of unemployment benefits South Korea 2020-2023

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Unemployment benefit spending as a percentage of GDP in Spain from 2022 to 2026

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Annual unemployment rate in the United Kingdom from 2000 to 2028

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18.3 Causes of Unemployment Around the World

Learning objectives.

• Explain the nature and causes of unemployment
• Analyze the natural rate of unemployment and the factors that affect it
• Identify how undeveloped labor markets can result in the same hardships as unemployment

The causes of unemployment in high-income countries of the world can be categorized in two ways: either cyclical unemployment caused by the economy being in a recession, or the natural rate of unemployment caused by factors in labor markets, such as government regulations regarding hiring and starting businesses.

Unemployment From a Recession

For unemployment caused by a recession, the Keynesian economic model points out that both monetary and fiscal policy tools are available. The monetary policy prescription for dealing with recession is straightforward: run an expansionary monetary policy to increase the quantity of money and loans, drive down interest rates, and increase aggregate demand . In a recession , there is usually relatively little danger of inflation taking off, and so even a central bank, with fighting inflation as its top priority, can usually justify some reduction in interest rates.

With regard to fiscal policy , the automatic stabilizers discussed in Government Budget and Fiscal Policy should be allowed to work, even if this means larger budget deficits in times of recession. There is less agreement over whether, in addition to automatic stabilizers, governments in a recession should try to adopt discretionary fiscal policy of additional tax cuts or spending increases. In the case of the Great Recession, the case for this kind of extra-aggressive expansionary fiscal policy is stronger, but, for a smaller recession, given the time lags of implementing fiscal policy, discretionary fiscal policy should be used with caution.

However, the aftermath of the Recession emphasizes that expansionary fiscal and monetary policies do not turn off a recession like flipping a switch turns off a lamp. Even after a recession is officially over and positive growth has returned, it can take some months—or even a couple of years—before private-sector firms believe the economic climate is healthy enough that they can expand their workforce.

The Natural Rate of Unemployment

Unemployment rates in the nations of Europe have typically been higher than in the United States. In 2006, before the start of the Great Recession , the U.S. unemployment rate was 4.6 percent, compared with 9 percent in France, 10.4 percent in Germany, and 7.1 percent in Sweden. The pattern of generally higher unemployment rates in Europe, which dates back to the 1970s, is typically attributed to the fact that European economies have a higher natural rate of unemployment because they have a greater number of rules and restrictions that discourage firms from hiring and unemployed workers from taking jobs.

Addressing the natural rate of unemployment is straightforward in theory but difficult in practice. Government can play a useful role in providing unemployment and welfare payments, passing rules about where and when businesses can operate, assuring that the workplace is safe, and so on. But these well-intentioned laws can, in some cases, become so intrusive that businesses decide to place limits on their hiring.

For example, a law that imposes large costs on a business that tries to fire or lay off workers will mean that businesses try to avoid hiring in the first place, as is the case in France. According to Business Week (Viscusi, 2012), France “has 2.4 times as many companies with 49 employees as with 50. . . . according to the French labor code, once a company has at least 50 employees inside France, management must create three worker councils, introduce profit sharing, and submit restructuring plans to the councils if the company decides to fire workers for economic reasons.” This labor law essentially limits employment—or raises the natural rate of unemployment.

Undeveloped Labor Markets

Low-income and middle-income countries face employment issues that go beyond unemployment as it is understood in the high-income economies. A substantial number of workers in these economies provide many of their own needs by farming, fishing, or hunting. They barter and trade with others and may take a succession of short-term or one-day jobs, sometimes being paid with food or shelter, sometimes with money. They are not unemployed in the sense that the term is used in the United States and Europe, but neither are they employed in a regular wage-paying job.

The starting point of economic activity, as discussed in Welcome to Economics! , is the division of labor, in which workers specialize in certain tasks and trade the fruits of their labor with others. Workers who are not connected to a labor market are often unable to specialize very much. Because these workers are not officially employed, they are often not eligible for social benefits like unemployment insurance or old-age payments—if such payments are even available in their country. Helping these workers to become more connected to the labor market and the economy is an important policy goal. Indeed, recent research by development economists suggests that one of the key factors in raising people in low-income countries out of the worst kind of poverty is whether they can make a connection to a somewhat regular wage-paying job.

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19.3 Causes of Unemployment around the World

Learning objectives.

• Explain the nature and causes of unemployment
• Analyze the natural rate of unemployment and the factors that affect it
• Identify how undeveloped labor markets can result in the same hardships as unemployment

We can categorize the causes of unemployment in the world's high-income countries in two ways: either cyclical unemployment caused by the economy when in a recession, or the natural rate of unemployment caused by factors in labor markets, such as government regulations regarding hiring and starting businesses.

Unemployment from a Recession

For unemployment caused by a recession, the Keynesian economic model points out that both monetary and fiscal policy tools are available. The monetary policy prescription for dealing with recession is straightforward: run an expansionary monetary policy to increase the quantity of money and loans, drive down interest rates, and increase aggregate demand . In a recession , there is usually relatively little danger of inflation taking off, and so even a central bank, with fighting inflation as its top priority, can usually justify some reduction in interest rates.

With regard to fiscal policy , the automatic stabilizers that we discussed in Government Budgets and Fiscal Policy should be allowed to work, even if this means larger budget deficits in times of recession. There is less agreement over whether, in addition to automatic stabilizers, governments in a recession should try to adopt discretionary fiscal policy of additional tax cuts or spending increases. In the case of the Great Recession, the case for this kind of extra-aggressive expansionary fiscal policy is stronger, but for a smaller recession, given the time lags of implementing fiscal policy, countries should use discretionary fiscal policy with caution.

However, the aftermath of the Recession emphasizes that expansionary fiscal and monetary policies do not turn off a recession like flipping a switch turns off a lamp. Even after a recession is officially over, and positive growth has returned, it can take some months—or even a couple of years—before private-sector firms believe the economic climate is healthy enough that they can expand their workforce.

The Natural Rate of Unemployment

Unemployment rates in European nations have typically been higher than in the United States. In 2006, before the start of the Great Recession , the U.S. unemployment rate was 4.6%, compared with 9% in France, 10.4% in Germany, and 7.1% in Sweden. We can attribute the pattern of generally higher unemployment rates in Europe, which dates back to the 1970s, to the fact that European economies have a higher natural rate of unemployment because they have a greater number of rules and restrictions that discourage firms from hiring and unemployed workers from taking jobs.

Addressing the natural rate of unemployment is straightforward in theory but difficult in practice. Government can play a useful role in providing unemployment and welfare payments, for example, by passing rules about where and when businesses can operate, and assuring that the workplace is safe. However, these well-intentioned laws can, in some cases, become so intrusive that businesses decide to place limits on their hiring.

For example, a law that imposes large costs on a business that tries to fire or lay off workers will mean that businesses try to avoid hiring in the first place, as is the case in France. According to Business Week , “France has 2.4 times as many companies with 49 employees as with 50 ... according to the French labor code, once a company has at least 50 employees inside France, management must create three worker councils, introduce profit sharing, and submit restructuring plans to the councils if the company decides to fire workers for economic reasons.” This labor law essentially limits employment (or raises the natural rate of unemployment).

Undeveloped Labor Markets

Low-income and middle-income countries face employment issues that go beyond unemployment as it is understood in the high-income economies. A substantial number of workers in these economies provide many of their own needs by farming, fishing, or hunting. They barter and trade with others and may take a succession of short-term or one-day jobs, sometimes receiving pay with food or shelter, sometimes with money. They are not “unemployed” in the sense that we use the term in the United States and Europe, but neither are they employed in a regular wage-paying job.

The starting point of economic activity, as we discussed in Welcome to Economics! , is the division of labor, in which workers specialize in certain tasks and trade the fruits of their labor with others. Workers who are not connected to a labor market are often unable to specialize very much. Because these workers are not “officially” employed, they are often not eligible for social benefits like unemployment insurance or old-age payments—if such payments are even available in their country. Helping these workers to become more connected to the labor market and the economy is an important policy goal. Recent research by development economists suggests that one of the key factors in raising people in low-income countries out of the worst kind of poverty is whether they can make a connection to a somewhat regular wage-paying job.

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Causes of Rising Unemployment Essay

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Introduction

Works cited.

Human beings have various needs that are essential for their survival on earth. These needs are categorized as basic (food, clothing, shelter, education and proper health care) hence one can not survive without them. Even though others are more urgent and important than others, it requires proper planning to ensure that they are all considered and catered for. In order to have these essential needs, a person has to have money to access or buy them. Money is earned through payments from employment. This essay aims at pin pointing the main reasons why there is an increasing rate of unemployment in many countries in the world.

Employment refers to any activity that is aimed at generating income to an individual in terms of profit or salary. Profits are realized when a person invests capital on any business activity while salary is obtained after offering services to an individual, company or organization (Powers 104). Unemployment is a situation that involves lack of participation in an activity that generates income for the individual. This has been fuelled by the following major reasons that are man made while others are natural;

Human population growth rate has sky rocketed in the last few years to supersede the world’s ability to create employment opportunities to the available population (Cottle 36). The world’s population is said to be increasing at a compounded rate of about eighty million people every year. This statistic means that after about eighteen years time there should be an addition of at least fifty million employment opportunities for these people when they are grown ups. In addition, this population is projected to be about ten billion by the year 2050. These statistics mean that there should be about four billion newly created employment opportunities by 2050. However, this is usually not the case as the rate of employment opportunities being created are very few compared to the demands of the population and this means that many people will be unemployed regardless of their qualifications.

Technology and innovations have also contributed to the high rates of unemployment when people are being forced to leave their work positions as machines take over. In the last four decades a single office would have an office secretary, personal assistant, office messenger and an office clerk (Stringham 121). However, with the increase in the use of computers in the office one person is able to do all these chores courtesy of the internet. People with the ability to use computers to perform various tasks are usually considered better candidates in interviews compared to people with limited ability. In some occasions, human beings have been completely replaced by machines like in the dairy sector where milking of dairy cow is now being widely done by milking machines. The use of robots in many industrial and warehousing processes has contributed greatly to the displacement of human labor in the production processes. Furthermore, the use of robot controllers and integrators that combine human and machine efforts is a recent development that will have great impact on employment opportunities in the world.

The most inevitable factor that has contributed to high unemployment rate in all parts of the world is the depletion of natural resources that offer employment opportunities to the community. Many countries that have natural resources like mineral ores and carbon fuels usually offer immense employment opportunities to the local and beneficiary population. However most of these resources are not renewable others like timber take too long to be replaced and regain their useful state. Sometimes human activities lead to the depletion of these natural resources (Brophy 92). Whenever these resources are depleted the people who were directly and indirectly depending on them for employment become jobless.

The high inflation rate has made it very difficult for many companies to sustain their production processes and at the same time keep their staff at work. Many businesses have closed down as the costs incurred are much higher than the profits realized. This means that the final result is nothing short of losses and wastage of resources (Brophy 135). On the other hand people have taken loans from banks in order to counter the effects of inflation but this proves futile as the high interest rates on loans deprive them the profits realized. Banks also have not been left out as they are forced to increase their lending rates to the clients in order to sustain their operations. This in turn discourages people from borrowing money from these financial institutions forcing them to close down and more workers are laid off leading to unemployment.

Furthermore, the education system being used in many countries is based on theoretical concepts. It has ignored the practical aspects of skills and knowledge and therefore converting these theories to real use in the job market becomes a tall order. Many students graduate with very remarkable grades, but use most of their time looking for suitable employment (Brophy 112). Some have been blinded by the fact that they are educated and have become too selective in their choice of work. They ignore simple and manual labor on grounds that they are educated and need ‘respectable’ work. This creates temporary unemployment as thousands of graduates become jobless while they wait for their star to shine.

Lastly, the world is currently being faced with numerous terrorists’ attacks that have threatened the existence of human life. For instance the terrorist bombings in the World Trade Center in America (September 11 th , 2001) threatened international investments in cosmopolitan countries and cities. This is because the costs incurred in the restoration of the businesses and injuries incurred are very expensive (Powers 84). It is estimated that America suffered a loss of about $ 95 billion in terms of losses to the city of New York in jobs, salaries, taxes, damage to infrastructure and costs of cleaning the city. In addition, the insurance industry suffered a loss of about $ 40 billion while the global market suffered an incalculable amount. Such terrorist activities deter investments that in turn limit the potential of creating employment opportunities and so many qualified people are left jobless while investors fear the safety of their businesses.

However, the high rate of unemployment can be controlled by careful family planning to regulate the high population growth rate. In addition, the government should enact laws that govern the use of natural resources to avoid wastage and misuse. Learning institutions should adopt education systems that produce manpower that suits the job market. Security should be given high consideration in national budgets to provide secure investment opportunities in all countries to foreigners and the locals.

Unemployment has resulted to the rise of many social, economic and political evils and every one should play their roles in ensuring there are available opportunities for qualified candidates. Unemployment lowers the Gross Domestic Product due to high dependency on the working population hence limiting national growth, but with careful long and short term planning many states will successfully fight unemployment.

Brophy, Tom. Little Victories: Conquering Unemployment . New York: CreateSpace, 2010. Print.

Cottle, Thomas J. Hardest Times: The Trauma of Long-Term Unemployment . Massachusetts: University of Massachusetts, 2003. Print

Powers, Sarah. Unemployment Doesn’t Have to Suck . New York: Sarah Powers, 2012. Print.

Stringham, Jim. The Unemployment Survival Guide . Boston: Gibbs Smith Publisher, 2004. Print.

• UAE and GCC Economic Analysis: Inflation and Unemployment
• Key International Economic Challenges
• Youth Unemployment in Africa: A Challenge for Public Policy Makers
• The Take-Up of Unemployment Study in USA
• Historical Analysis on Unemployment
• Tendering and Bidding Theories
• Marco`S Restaurant: Assessment and Remedies
• Management in Emerging Economies Analysis
• Inflation in the US Business Industry
• Inequality and Economy of the Countries
• Chicago (A-D)
• Chicago (N-B)

IvyPanda. (2022, January 23). Causes of Rising Unemployment. https://ivypanda.com/essays/causes-of-rising-unemployment/

"Causes of Rising Unemployment." IvyPanda , 23 Jan. 2022, ivypanda.com/essays/causes-of-rising-unemployment/.

IvyPanda . (2022) 'Causes of Rising Unemployment'. 23 January.

IvyPanda . 2022. "Causes of Rising Unemployment." January 23, 2022. https://ivypanda.com/essays/causes-of-rising-unemployment/.

1. IvyPanda . "Causes of Rising Unemployment." January 23, 2022. https://ivypanda.com/essays/causes-of-rising-unemployment/.

Bibliography

IvyPanda . "Causes of Rising Unemployment." January 23, 2022. https://ivypanda.com/essays/causes-of-rising-unemployment/.

COVID crisis to push global unemployment over 200 million mark in 2022

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The economic crisis caused by the COVID pandemic is expected to contribute to global unemployment of more than 200 million people next year, with women and youth workers worst-hit, UN labour experts  said  on Wednesday.

The International Labour Organization ( ILO ) also maintained in a new report that although the world’s nations “will emerge” from the ongoing health crisis, “five years of progress towards the eradication of working poverty have been undone” nonetheless.

International Labour Organization

“We’ve gone backwards, we’ve gone backwards big time,” said ILO Director-General Guy Ryder. “Working poverty is back to 2015 levels; that means that when the 2030 Sustainable Development Agenda was set, we’re back to the starting line.”

The worst-affected regions in the first half of 2021 have been Latin America and the Caribbean, Europe and Central Asia, all victims of uneven recovery.

They’ve seen estimated working-hour losses exceed eight per cent in the first quarter and six per cent in the second quarter, far higher than the global average (of 4.8 and 4.4 per cent respectively).

Women’s roles questioned

Women have been hit “disproportionately” by the crisis, seeing a five per cent employment fall in 2020, compared to 3.9 per cent for men.

“A greater proportion of women also fell out of the labour market, becoming inactive,” ILO said, noting that “additional domestic responsibilities” had resulted from lockdowns which risked a “re-traditionalization” of gender roles.

Youth employment has also continued to suffer the economic downturn, falling 8.7 per cent in 2020, compared with 3.7 per cent for adults.

The most pronounced fall has been in middle-income countries where the consequences of this delay and disruption to the early labour market experience of young people “could last for years”, ILO warned.

$3.20 a day

Pandemic-related disruption has also brought “catastrophic consequences” for the world’s two billion informal sector workers.

Compared to 2019, an additional 108 million workers worldwide are now categorized as “poor” or “extremely poor” – meaning that they and their families live on the equivalent of less than $3.20 per person, per day.

“While signs of economic recovery are appearing as vaccine campaigns are ramped up, the recovery is likely to be uneven and fragile,” Mr Ryder said, as ILO unveiled its forecast that global unemployment will reach 205 million people in 2022, up from 187 million in 2019.

The Geneva-based organization also projected a “jobs gap” increase of 75 million in 2021, which is likely to fall to 23 million in 2022 – if the pandemic subsides.

The related drop in working-hours, which takes into account the jobs gap and those working fewer hours, amounts to the equivalent of 100 million full-time jobs in 2021 and 26 million in 2022.

“This shortfall in employment and working hours comes on top of persistently high pre-crisis levels of unemployment, labour underutilization and poor working conditions,” ILO said in  World Employment and Social Outlook: Trends 2021, (WESO Trends) .

The ILO report maintained that although global employment recovery should accelerate in the second half of 2021, it will likely be an uneven recovery.

Unequal vaccine access is to blame, ILO insisted, in addition to the limited capacity of most developing and emerging economies to support the strong fiscal stimulus measures that have characterised the approach of the world’s wealthiest countries to the COVID-induced downturn.

Decent jobs essential

“Without a deliberate effort to accelerate the creation of decent jobs, and support the most vulnerable members of society and the recovery of the hardest-hit economic sectors, the lingering effects of the pandemic could be with us for years in the form of lost human and economic potential and higher poverty and inequality,” said Mr. Ryder. “We need a comprehensive and co-ordinated strategy, based on human-centred policies, and backed by action and funding. There can be no real recovery without a recovery of decent jobs.”

• global economy

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Part 32: Macroeconomic Policy Around the World

32.3 Causes of Unemployment around the World

Learning objectives.

By the end of this section, you will be able to:

• Explain the nature and causes of unemployment
• Analyze the natural rate of unemployment and the factors that affect it
• Identify how undeveloped labor markets can result in the same hardships as unemployment

We can categorize the causes of unemployment in the world’s high-income countries in two ways: either cyclical unemployment caused by the economy when in a recession, or the natural rate of unemployment caused by factors in labor markets, such as government regulations regarding hiring and starting businesses.

Unemployment from a Recession

For unemployment caused by a recession, the Keynesian economic model points out that both monetary and fiscal policy tools are available. The monetary policy prescription for dealing with recession is straightforward: run an expansionary monetary policy to increase the quantity of money and loans, drive down interest rates, and increase aggregate demand . In a recession , there is usually relatively little danger of inflation taking off, and so even a central bank, with fighting inflation as its top priority, can usually justify some reduction in interest rates.

With regard to fiscal policy , the automatic stabilizers that we discussed in Government Budgets and Fiscal Policy should be allowed to work, even if this means larger budget deficits in times of recession. There is less agreement over whether, in addition to automatic stabilizers, governments in a recession should try to adopt discretionary fiscal policy of additional tax cuts or spending increases. In the case of the Great Recession, the case for this kind of extra-aggressive expansionary fiscal policy is stronger, but for a smaller recession, given the time lags of implementing fiscal policy, countries should use discretionary fiscal policy with caution.

However, the aftermath of the Recession emphasizes that expansionary fiscal and monetary policies do not turn off a recession like flipping a switch turns off a lamp. Even after a recession is officially over, and positive growth has returned, it can take some months—or even a couple of years—before private-sector firms believe the economic climate is healthy enough that they can expand their workforce.

The Natural Rate of Unemployment

Unemployment rates in European nations have typically been higher than in the United States. In 2006, before the start of the Great Recession , the U.S. unemployment rate was 4.6%, compared with 9% in France, 10.4% in Germany, and 7.1% in Sweden. We can attribute the pattern of generally higher unemployment rates in Europe, which dates back to the 1970s, to the fact that European economies have a higher natural rate of unemployment because they have a greater number of rules and restrictions that discourage firms from hiring and unemployed workers from taking jobs.

Addressing the natural rate of unemployment is straightforward in theory but difficult in practice. Government can play a useful role in providing unemployment and welfare payments, for example, by passing rules about where and when businesses can operate, and assuring that the workplace is safe. However, these well-intentioned laws can, in some cases, become so intrusive that businesses decide to place limits on their hiring.

For example, a law that imposes large costs on a business that tries to fire or lay off workers will mean that businesses try to avoid hiring in the first place, as is the case in France. According to Business Week , “France has 2.4 times as many companies with 49 employees as with 50 … according to the French labor code, once a company has at least 50 employees inside France, management must create three worker councils, introduce profit sharing, and submit restructuring plans to the councils if the company decides to fire workers for economic reasons.” This labor law essentially limits employment (or raises the natural rate of unemployment).

Undeveloped Labor Markets

Low-income and middle-income countries face employment issues that go beyond unemployment as it is understood in the high-income economies. A substantial number of workers in these economies provide many of their own needs by farming, fishing, or hunting. They barter and trade with others and may take a succession of short-term or one-day jobs, sometimes receiving pay with food or shelter, sometimes with money. They are not “unemployed” in the sense that we use the term in the United States and Europe, but neither are they employed in a regular wage-paying job.

The starting point of economic activity, as we discussed in Welcome to Economics! , is the division of labor, in which workers specialize in certain tasks and trade the fruits of their labor with others. Workers who are not connected to a labor market are often unable to specialize very much. Because these workers are not “officially” employed, they are often not eligible for social benefits like unemployment insurance or old-age payments—if such payments are even available in their country. Helping these workers to become more connected to the labor market and the economy is an important policy goal. Recent research by development economists suggests that one of the key factors in raising people in low-income countries out of the worst kind of poverty is whether they can make a connection to a somewhat regular wage-paying job.

Key Concepts and Summary

We can address cyclical unemployment by expansionary fiscal and monetary policy. The natural rate of unemployment can be harder to solve, because it involves thinking carefully about the tradeoffs involved in laws that affect employment and hiring. Unemployment is understood differently in high-income countries compared to low- and middle-income countries. People in these countries are not “unemployed” in the sense that we use the term in the United States and Europe, but neither are they employed in a regular wage-paying job. While some may have regular wage-paying jobs, others are part of a barter economy.

Self-Check Questions

What are the different policy tools for dealing with cyclical unemployment?

If there is a recession and unemployment increases, we can call on an expansionary fiscal policy (lower taxes or increased government spending) or an expansionary monetary policy (increase the money supply and lower interest rates). Both policies stimulate output and decrease unemployment.

Explain how the natural rate of unemployment may be higher in low-income countries.

Aside from a high natural rate of unemployment due to government regulations, subsistence households may be counted as not working.

Review Questions

What are the two types of unemployment problems?

In low-income countries, does it make sense to argue that most of the people without long-term jobs are unemployed?

Critical Thinking Question

Is it possible to protect workers from losing their jobs without distorting the labor market?

Explain what will happen in a nation that tries to solve a structural unemployment problem using expansionary monetary and fiscal policy. Draw one AD/AS diagram, based on the Keynesian model, for what the nation hopes will happen. Then draw a second AD/AS diagram, based on the neoclassical model, for what is more likely to happen.

Retrieve the unemployment data from The World Bank database (http://databank.worldbank.org/data/home.aspx) for India, Spain, and South Africa for 2011-2015. Prepare a chart that compares India, Spain, and South Africa based on the data. Describe the key differences between the countries. Rank these countries as high-, medium-, and low-income countries. Explain what is surprising or expected about this data. How did the Great Recession impact these countries?

Viscusi, Gregory, and Mark Deen. “Why France Has So Many 49-Employee Companies.” Business Week . Last modified May 3, 2012. http://www.businessweek.com/articles/2012-05-03/why-france-has-so-many-49-employee-companies.

Principles of Econ 2e by OpenStax @ Rice University is licensed under a Creative Commons Attribution 4.0 International License , except where otherwise noted.

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Home — Essay Samples — Economics — Unemployment — Unemployment: Causes, Effects, and Solutions

Unemployment: Causes, Effects, and Solutions

• Categories: Unemployment

About this sample

Words: 685 |

Published: Jan 30, 2024

Words: 685 | Pages: 2 | 4 min read

Table of contents

Introduction, causes of unemployment, effects of unemployment, solutions to combat unemployment, a. economic factors.

• Global recession: During economic downturns, companies may reduce employment to cut costs and remain competitive.
• Automation and technological advancements: The use of machines and technology may replace human workers in some industries, leading to job losses.
• Outsourcing of jobs: Companies may choose to outsource jobs to other countries where labor costs are lower, leaving domestic workers unemployed.

B. Societal Factors

• Lack of education and skills: Individuals without proper education and job training may be ill-equipped to meet the demands of a constantly evolving job market.
• Discrimination in hiring processes: Certain groups, such as women, minorities, and older workers, may face barriers in securing employment due to discrimination.
• Dependency on welfare programs: Some individuals may choose to remain on welfare programs due to a lack of incentive to enter the workforce or because they cannot find suitable employment.

A. Economic Effects

• Reduction in consumer spending: Without a steady income, unemployed individuals may have less money to spend, resulting in a decline in consumer spending.
• Decline in government revenue: With fewer people working, the government may see a decline in tax revenue, which can impact its ability to provide necessary services and promote economic growth.
• Increase in social welfare expenses: The government may need to allocate more funds toward social welfare programs, such as unemployment benefits and food assistance, to support those who are unemployed.

B. Social Effects

• Increase in crime rates: Individuals who are unemployed may resort to criminal activities to make ends meet, leading to a rise in crime rates.
• Mental health issues: Unemployment can cause stress, anxiety, and depression, which can negatively impact an individual's mental health.
• Strained relationships and family instability: Unemployment may cause financial strain and tension within families, leading to relationship problems and instability.

A. Economic Solutions

• Encouraging entrepreneurship and small business development: Providing resources and support for individuals to start their own businesses can lead to job creation and economic growth.
• Promoting vocational training and skill development programs: Ensuring that individuals have access to education and training programs can increase their job readiness and competitiveness in the job market.
• Implementing balanced trade policies: Creating policies that promote fair trade and reduce job outsourcing can protect domestic jobs and promote job growth.

B. Social Solutions

• Addressing educational disparities and providing access to quality education: Providing quality education to disadvantaged communities can improve their job readiness and reduce unemployment rates.
• Combating discrimination in the workplace: Enforcing anti-discrimination laws and promoting diversity and inclusion in the workplace can reduce barriers to employment for certain groups.
• Strengthening social safety net programs: Ensuring that social welfare programs are designed to incentivize work and provide support to those in need can promote economic stability and reduce poverty.
• Bureau of Labor Statistics. (2021, October 8). Employment Situation Summary. https://www.bls.gov/news.release/empsit.nr0.htm

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Youth Unemployment in the Developing World Is a Jobs Problem

Instead of treating education like a silver bullet, a demand-side job creation strategy should be at the heart of youth unemployment programs.

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By Kartik Akileswaran , Jonathan Mazumdar & Angela Perez Albertos Oct. 31, 2023

“When I was preparing to come to Delhi for a job, everyone in the village laughed and asked how it was possible that my village education would find me a job in a big city,” recalled a 22-year-old Tabassum Naaz in 2010. They probably assumed her credentials would be too humble to be of use. Yet like thousands of others across India, from the 1990s onward, Tabassum did find a job (in her case, at Aegis business process outsourcing in Gurgaon, on the outskirts of Delhi). Her studies—at a little-known college in Bihar, one of the lowest-income states in India—were sufficient, because, to put it simply, there were employers seeking workers with her skills.

Many actors in international development today are rightly worried about youth unemployment; despite success stories like Tabassum’s, youth unemployment remains stubbornly high across developing countries: in 2022, it stood at 24.8 percent in the Middle East and North Africa (MENA), 20.5 percent in Latin America, 14.9 percent in Asia and the Pacific, and 12.7 percent in Sub-Saharan Africa. However, initiatives in this space tend to focus on the labor supply side, supporting skills development and education. The World Bank, for example, invested around $1 billion per year between 2002 and 2012 on skills training programs focused on youth. A search for “youth unemployment” in the World Economic Forum website reveals an overwhelming focus on skills development: A 2010 report lists “quality and relevance of education” as the first cause of youth unemployment, a 2016 article calls for training or job readiness programs to address youth unemployment in Latin America, and a 2020 article suggests teaching English, digital, and soft skills to solve the challenge in the MENA region. Other examples abound: Mastercard Foundation, which aims to address youth unemployment in Africa by creating 30 million jobs, identifies “improving the quality of education and vocational training” and “leveraging technology to connect employers and job seekers” as its first two strategies to enable job creation. A review of 75 youth employment programs in the MENA region centered on technical skills training, followed by soft skills training.

Tabassum’s story suggests a different approach. She represents a phenomenon in India that has been substantiated by multiple research studies: employment opportunities driving educational attainment. In this case, education enrollment (especially in English-language schools) actually increased near new IT centers. In other words, rather than education producing good jobs, it was the emergence of “good” jobs, that require certain skills, which incentivized parents to invest in their children’s education. But if a supply of jobs drives an increase in educational attainment, rather than the reverse, then it suggests a shift in orientation for the development community. Addressing youth unemployment by equipping young people with better skills is surely worthwhile in itself, but if not coupled with efforts to create new jobs, skill development initiatives, alone, will not solve the unemployment challenge.

A Jobs Problem

In developing countries, the basic issue is that there are simply not enough jobs for the youth entering the labor market every year, a mismatch exacerbated by high rates of population growth in most developing regions. McKinsey estimates that Africa alone will add 796 million people to the global labor force between 2020 and 2050, a net increase of close to 27 million people per year. For Africa , this will mean twice as many people added to the labor force as in the previous 30 years. Currently, 10-12 million African youth join the labor force every year, for whom there are only 3 million formal jobs available, which means 7-9 million new African youth lack access to a stable source of income, equivalent to the population of New York City. By the same token, India will add 183 million people to the global labor force in that period (close to 6 million per year), and estimates suggest that there will be around 45 million missing jobs in India by 2030.

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Education is not the silver bullet. As the MENA region illustrates, improved educational attainment does not necessarily lead to improved labor market outcomes: across the region, decades of rising educational attainment have not been matched by increases in labor force participation. For example, an expansion of tertiary education in Tunisia led to nearly 70 percent unemployment rates among university graduates in 2013. The World Bank even dubbed this phenomenon the “MENA paradox,” highlighting a reduction in public sector jobs–mostly held by educated workers—which has not been offset by a sufficient increase in private sector jobs.

Years of evaluations have provided substantial insight on the impact of supply-side interventions, and unfortunately, the evidence is underwhelming. A 2017 literature review found that for every 100 people offered vocational training, fewer than three found an “additional” job (one they would not have otherwise found if they had not received the training). Additionally, these programs come at a very high cost: between approximately $17 thousand and $60 thousand per additional person employed. The same analysis found that out of ten programs helping match candidates to jobs, only one had a significant impact on employment (an increase in employment of 2.4 percentage points over three years).

However, these interventions are more likely to be successful when implemented by the private sector or coupled with demand-side initiatives, such as training talent for a nascent industry. As the paper concludes: “One set of alternative policies is to move away from interventions on the labor supply side and focus more on policies to help firms overcome the obstacles they face in innovating, growing, and creating more jobs.” For instance, interventions aimed at unlocking labor demand might spur entry of new firms—by catalyzing pioneer firms or attracting foreign direct investment in new industries —or accelerate the productivity and growth of existing firms by limiting regulatory burdens or supporting them on management practices and export facilitation .

Toward a Demand-Side Approach

We recently argued that development philanthropists should focus on the most powerful route to prosperity : productive employment in a thriving economy. One concrete way in which the development and philanthropic community can do so is to put job creation at the heart of their youth unemployment programs and ensuring that supply-side and demand-side interventions work in tandem. Some philanthropies are already doing so, albeit with a focus on the United States’ jobs challenge. The Kauffman Foundation , for example, has a stated focus on supporting the start and growth of new businesses that can create jobs, and has made investments to improve job creation policy. The Aspen Institute’s Economic Opportunities Program is another example, which is supporting thinking and collaborative initiatives around “good” job creation . Dating back many years, various other large foundations, such as Ford Foundation and Rockefeller Foundation, have endorsed and funded job creation initiatives.

Philanthropies working in global development should extend this job creation focus from the United States to their developing country portfolios. Again, the cupboard isn’t barren; there are examples to learn from and emulate. Big Win Philanthropy has funded initiatives around job creation for youth, in countries like Ethiopia and Côte d’Ivoire . Funders like the Rockefeller Foundation have pursued job creation programs in the past, in promising sectors such as business process outsourcing. This resonates with us in particular, as our own organization, Growth Teams, has facilitated the development of an outsourcing sector that will create thousands of good jobs in Rwanda.

While there is no easy answer for how to create more jobs in developing countries, various examples illustrate what progress on this front can do for countries as a whole. Singapore’s government under Lee Kuan Yew, for example, set out to build a modern economy by attracting labor-intensive foreign manufacturing that would create low-skilled jobs first, then shifting to more skill-intensive manufacturing and finally playing a leading role in the global knowledge economy. At all stages, the ability to put education at the service of economic growth by matching skills supply and demand was central to the country’s successful economic transformation.

Costa Rica offers another instructive example. By targeting foreign direct investment in services, the country was able to leverage growth in key parts of its economy to increase labor productivity and create new job opportunities for its population. Job creation not only happened directly through the multinational corporations setting foot in the country but also through local suppliers that grew after plugging into global value chains.

Addressing youth unemployment requires a balanced approach that recognizes the interplay between supply and demand in the labor market. These examples all underscore the importance of job creation in addressing this challenge. While supply-side interventions that focus on skills development are crucial, they must be complemented by demand-side initiatives that support the creation of jobs in which these skills can be used productively. Governments, bilateral and multilateral donor agencies, and philanthropists should strike a more even balance between supply-side and demand-side interventions. In doing so, they will enable more comprehensive and sustainable solutions to youth unemployment, thereby empowering young workers and fostering economic prosperity for future generations.

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Read more stories by Kartik Akileswaran , Jonathan Mazumdar & Angela Perez Albertos .

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Hard Landing Concerns Jolt Global Markets

Investors are focusing on slowing U.S. economic growth as calls for the Fed to cut interest rates grow louder.

By Andrew Ross Sorkin Ravi Mattu Bernhard Warner Sarah Kessler Michael J. de la Merced Lauren Hirsch and Ephrat Livni

Slowdown fears

Global markets are a blur of red on Friday as investors fret that the U.S. economy is heading for a slowdown.

Lackluster tech earnings are weighing on sentiment (more on that below), but the bigger worry is a softening jobs market and a spending pullback by consumers that threatens to crimp corporate profit .

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There’s even talk that the central bank could consider a jumbo half-percentage-point rate cut to pull off its hope for a soft landing in which inflation is cooled without tipping the economy into recession.

Here’s the latest:

S&P 500 futures were pointing to another weak open. That’s after the benchmark index fell 1.4 percent on Thursday as investors dumped stocks in favor of less risky assets like Treasury notes.

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What to watch on Friday: The payroll report is expected to show that employers added 175,000 jobs in July, with the unemployment rate staying at 4.1 percent. Thursday’s closely watched jobless claims data showed how antsy the markets have become about the deteriorating jobs market: The S&P 500 fell sharply after the data showed the largest spike in workers filing for unemployment benefits in nearly a year.

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